Defense Acquisition Research Journal Issue 95

Use of Factors in Development Estimates: Improving the Cost Analyst Toolkit

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While the discussion thus far has focused on an illustrative example and potential program-level impacts, some specific findings deserve increased attention and can impact where cost analysts allocate effort in refining cost factors germane to their specific estimate. First, knowledge of contract type is highly desirable, as the contract type category contained the highest number of statistical differences between the subcategories. While it would be most advantageous to develop composite factors based on the precise contract type (e.g., cost plus award fee), even broader classifications into the two general categories of cost reimbursable or fixed price contracts are useful. Second, the commodity type category was found to have the second most differences in median values after contract type. Commodity informa tion should be readily available for any project, allowing for ease of analyst calibration. The results also indicate those areas where analysts should economize their time. Specifically, the results showed fewer differences in the contractor type category. The implication is that deriving the factor from prime or subcontract data has little effect. Future research should focus not only on factor development in other phases of the life cycle, but also on those elements of cost growth that are not attributable to estimator toolkit deficiencies. Lastly, the statistical testing also illuminates which of the eight individual WBS elements deserve the most attention from cost analysts. Interestingly, the SE/PM and ST&E elements were flagged in virtually every categorical test. Making the distinction more compelling is the fact that these two ele ments typically have the highest in raw dollar value of the WBS elements analyzed. Coupling the high dollar value with the statistical testing results suggests that analysts should spend their time and energy on these areas.

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Defense ARJ, January 2021, Vol. 28 No. 1 : 40-70